- By GF Value
The stock of MiX Telematics (NYSE:MIXT, 30-year Financials) gives every indication of being fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $14.21 per share and the market cap of $310.3 million, MiX Telematics stock is believed to be fairly valued. GF Value for MiX Telematics is shown in the chart below.
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MIXT 15-Year Financial Data
The intrinsic value of MIXT
Peter Lynch Chart of MIXT
Because MiX Telematics is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 22.3% over the past five years.
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. MiX Telematics has a cash-to-debt ratio of 4.62, which which ranks in the middle range of the companies in Software industry. The overall financial strength of MiX Telematics is 8 out of 10, which indicates that the financial strength of MiX Telematics is strong. This is the debt and cash of MiX Telematics over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. MiX Telematics has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $128.8 million and earnings of $0.6 a share. Its operating margin is 12.36%, which ranks better than 76% of the companies in Software industry. Overall, GuruFocus ranks the profitability of MiX Telematics at 9 out of 10, which indicates strong profitability. This is the revenue and net income of MiX Telematics over the past years:
Growth is probably the most important factor in the valuation of a company. GuruFocus research has found that growth is closely correlated with the long term performance of a company's stock. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of MiX Telematics is 22.3%, which ranks better than 81% of the companies in Software industry. The 3-year average EBITDA growth rate is 39.3%, which ranks better than 82% of the companies in Software industry.
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, MiX Telematics's ROIC is 8.64 while its WACC came in at 5.21. The historical ROIC vs WACC comparison of MiX Telematics is shown below:
In conclusion, MiX Telematics (NYSE:MIXT, 30-year Financials) stock gives every indication of being fairly valued. The company's financial condition is strong and its profitability is strong. Its growth ranks better than 82% of the companies in Software industry. To learn more about MiX Telematics stock, you can check out its 30-year Financials here.
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This article first appeared on GuruFocus.